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UK Votes: How Will the December Elections Will Impact India and Indian Businesses

By Finserv MARKETS - Dec 5,2019
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The 2019 elections in the United Kingdom will be held on December 12, 2019, and the outcome of the polls is expected to have repercussions– pertaining to strategic partnerships, commercial relations and trade– not only for the developed economies of European Union, but also for emerging economies like India. The 2019 UK election is being held after the last general elections of June 2017.

The polls will be conducted across 650 constituencies across England, Scotland, Wales and Northern Ireland. Each constituency has more than 65,000 voters, and around 46 million voters are expected to exercise their franchise. There are eight different parties, including the Labour party and the Conservatives along with Liberal Democrats and Brexit Party contesting for the polls in Great Britain, while five parties like Democratic Unionist Party, the Alliance Party, Social Democratic and Union Party are contesting the elections in Northern Ireland.

How Will the December Elections Will Impact India and Indian Businesses

Voting procedure in the 2019 UK elections:

There are a total of 650 seats for Members of Parliament (MPs) in the House of Commons, and the party which wins more than half of the seats (326 or above) will be invited by the queen to form the government. In the case where no party secures a clear majority, the government will be formed through coalition between parties.

Brexit and the political scenario in UK:

Britain’s exit from the European Union is known as Brexit. Earlier, residents of Great Britain had voted for exit from the EU in a referendum. In early 2019, the UK parliament thrice rejected former Conservative party’s Prime Minister Theresa May’s withdrawal agreement to exit from the EU on March 29, 2019. Following this,the EU agreed to postpone Brexit beyond the scheduled date. Meanwhile, May could not reach a new deal with the EU, or reformulate the exit strategy, and resigned after remaining indecisive for few months. On July 23, a new conservative party member,Boris Johnson was elected as Prime Minister. Johnson favoured a no-deal Brexit, or the UK leaving the EU without any revised agreement on October 31, 2019. Though the party MPs provided a preliminary approval on his Brexit deal, his time frame was rejected. This again delayed Brexit till January 31, 2020. The polls are expected to break the deadlock on Brexit.

How will the elections impact Indian businesses?

The elections will have a direct impact on Britain’s Brexit policy. And Brexit, directly impacts India.

How Will the December Elections Will Impact India and Indian Businesses
 

The new government, and its policy on Brexit would decide on a host of factors, including trade, investment, commerce and currency. Some of the key factors that could impact India and Indian business are:

  • FDI (Foreign Direct Investment) for UK:

India is the second largest source of FDI in the UK. This was because of the UK having Free Trade Agreement (FTA) with all the EU members. The UK also was the gateway to Europe for Indian businesses. While not being able to enter Europe via the UK would result in short term distress to Indian businesses, there could be positive impact as well. Not wanting to lose the Indian FDI, the UK can provide several incentives to Indian firms, including tax breaks, relaxed regulations and better terms of trade.

  • India trade with UK and EU:

If the winning party decides for a no deal Brexit, it could adversely impact India’s export with the UK. A non-amicable, hastened exit would result in a slowdown of both the EU’s and UKs economy, thus resulting in a decline in demand for Indian goods and services. A positive aspect, however, could be the UK strengthening its trade relations with India, after losing a unified European market. Also, the EU can try to reach out to India by negotiating better trade and investment deals to counter imminent trade competition with China and the USA. Another fallout could be foriegn companies investing in India stock market after uncertainty in the UKs and EUs stock markets.

Even as the world awaits the poll results, and the subsequent decision on Brexit, this global concern, has already adversely impacted the Indian economy, which is facing a slump. The condition is no better for Small and Medium Enterprises (SMEs), which face an acute shortage of funds. You can, however, easily avail small business loans up to Rs 30 lakh from Finserv MARKETS. These customized business loans can allow you to expand your business along with helping in scaling up of operations. What’s more, these loans come with minimal documentation, and require no collateral.

  • Pound versus Indian Rupee:

Political decisions after elections favouring non-amicable Brexit with the EU would result in a slowdown in the UK, thus strengthening Indian Rupee against the Pound. This would provide opportunities to Indian businesses for investment in sectors like real estate. Travel and education expenses would also decrease for Indians.

Conclusion:

Thus elections in the UK would decide the course and future of Brexit, which, in turn will impact Indian businesses. As per market experts, the elections and the subsequent Brexit deal will have both positive and negative outcomes for Indian businesses.

Indian businesses should remain prepared for both positive and negative outcomes in the face of impending 2019 UK elections. If you are looking to take advantage of the situation, or hedge against a dip in the market, then you can zero in on a business loan, available on Finserv MARKETS. You can receive easy and quick business loans up to Rs 30 lakh at low interest rates. These loans address all your financing requirements in a hassle-free manner. Also read what are the benefits of business loan online only at Finserv MARKETS

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